 "Biggest challenge facing new Boeing CEO is winning over other airlines")
Boeing Co.’s customers finally have what they’ve been after: a leadership shakeup at the planemaker.
Days after top executives of major US airlines turned up the heat on Boeing’s board to get a handle on its spiraling safety crisis, the embattled manufacturer announced one of the most dramatic overhauls in its century-long history. The trio that has led the company for the past four tumultuous years is relinquishing control, including Chief Executive Officer Dave Calhoun.
The fix was in after the CEOs of Boeing’s three largest US customers — United Airlines Holdings Inc., Southwest Airlines Co. and American Airlines Group Inc. — pressed Boeing directors last week for a meeting where they could air concerns without Calhoun present, according to people familiar with the campaign.
The CEOs were armed with the support of other airline leaders, an industry trade group and the frustrations of a broader group of stakeholders: the flying public and the lawmakers in Washington who represent them, these people said.
“The simplest explanation is often the correct one, and it’s the upcoming meetings without Calhoun and the airlines, who are not only mad but reflect a much broader traveling public anger, too,” said Richard Aboulafia, managing director of consultancy AeroDynamic Advisory. “What the board couldn’t do, what the US government couldn’t do, what investors couldn’t do, maybe it came down to customers reflecting the fact that their jet fleets were fast becoming a meme.”
The leadership changes were formalized over a weekend board session but had been discussed for months after a near-catastrophic incident on an Alaska Airlines jet pushed the planemaker into crisis, these people said. Directors wanted to signal the overhaul before the company issued its annual proxy statement, which was already weeks later than originally planned.
Boeing’s new management faces a myriad of challenges — criminal investigations, eroding finances, regulatory scrutiny, market share losses to rival Airbus SE — along with a rare opportunity to shift Boeing away from the focus on cash that has driven its strategy for the past decade. They also have to convince the companies that buy its planes and the consumers who ride on them that their aircraft are safe.
The company is already in talks to buy its largest supplier, Spirit AeroSystems Holdings Inc., a gambit that would’ve been unthinkable before the Alaska incident. Its incoming leadership will also need to map out plans for its first all-new jetliner in two decades, Calhoun told CNBC on Monday after announcing his impending departure.
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That gives Steve Mollenkopf, the former Qualcomm Inc. chief who will head the search for a replacement to Calhoun, an enormous say over Boeing’s future. Calhoun plans to stay on until the end of the year to help guide Boeing through unprecedented scrutiny of its factory operations by the Federal Aviation Administration and potentially contentious labor negotiations with its largest union.
Larry Kellner, chairman of Boeing’s board, won’t stand for reelection at the company’s annual meeting this Spring. Stan Deal, the head of the division making commercial jetliners, stepped down immediately and was replaced by Chief Operating Officer, Stephanie Pope, who had been seen as a potential successor to Calhoun.
“I think there are enormous opportunities here,” said Aboulafia, who has been a vocal critic of Calhoun. “Getting rid of three key people in the space of a day. There’s so much potential here for the company, the workforce. All that’s needed is real leadership with a solid knowledge of the industry.”
Potential candidates for the top job include Pope, who remains in the running despite changing roles in Monday’s reshuffling, according to a person familiar with the matter. Others potentially under consideration could include General Electric Co. CEO Larry Culp; David Gitlin, a Boeing director and CEO of Carrier Global Corp.; Patrick Shanahan, Spirit AeroSystems CEO; and Greg Smith, American Airlines chairman and Boeing’s former finance chief.
Representatives for Gitlin, Shanahan and Smith didn’t respond to requests for comment. When asked in a February interview about the Boeing CEO role, Culp said he was “looking forward to serving Boeing as their most important partner and supplier.” GE had no additional comment on Monday.
Boeing Reset
The reset gives Boeing a chance to recapture some of its lost luster by making bold strategic moves, fixing simmering manufacturing issues and shifting from what critics saw as a myopic focus on cash generation. Boeing has posted $26 billion in losses over the last three years.
Frustration and dismay had mounted over months by some of Boeing’s largest customers and safety officials over the latest crisis centered on the 737 Max jetliner, the planemaker’s main source of revenue and a backbone of domestic flying within the US. The FAA has capped production of the workhorse jet until it is satisfied Boeing has adequate quality controls in place in the wake of a January accident. As the agency finishes up an audit of the company’s manufacturing, Michael Whitaker, the agency’s new head, expressed concern about its safety culture in a rare interview on NBC Nightly News.
The FAA is also revisiting Boeing this week to review its 30-day plan as the planemaker works to strengthen control over quality in its factories and supply chain. That will be followed by 60- and 90-day reviews, Calhoun told CNBC, with the agency expecting the planemaker to demonstrate that it’s making progress.
Boeing has taken steps to address a big source of its quality breakdowns: planes that make their way down the assembly line rather than halting work for late-arriving parts, Brian West, the company’s chief financial officer said in a March 20 presentation. As of March 1, it stopped accepting fuselages from Spirit AeroSystems that didn’t fully meet manufacturing specifications.
“At the end of the day it may be good for them, we who buy Boeing aircraft and airlines, for them to have gone through a very, very difficult period,” said John Plueger, CEO of Air Lease Corp., the largest US aircraft leasing company.
A stronger Boeing would emerge with the “confidence of regulators and ultimately the confidence of the flying public,” Plueger said.